The ECB announced that its asset-buying programme will be extended from March next year to the end of 2017 but at a reduced pace of 60 billion euros from April from the current 80 billion euros.

Despite the reduced pace of buying, ECB President Mario Draghi told a press conference that there "is no question about tapering".

The ECB also added that if "the outlook becomes less favorable or if financial conditions become inconsistent with further progress towards a sustained adjustment of the path of inflation", then it would increase the programme again in terms of size and/or duration.

However, Peter Cardillo, chief market economist at First Standard Financial, warned that this was just "the calm before the storm" while Claus Vistesen, chief euro zone economist at Pantheon Macro, wrote in a note: "The economy could easily grind to a halt due to political uncertainty."

Still, some analysts think that the stock market rally has at least a bit more to run.

Jeffrey Saut, the chief investment strategist at Raymond James, wrote on Monday that after a pause last week, the S&P 500 has entered the final surge of a buying climax.

Monday, 5 December 2016

The S&P 500 fell 1 percent last week, its first weekly drop sine the US presidential election.

The pause in the US stock market rally last week came as USA Today reported that market valuations have become stretched.

“Since Election Day, the price-to-earnings (P-E) ratio, a common metric used to measure whether stocks are cheap or overvalued, have swelled further to 17.1 times earnings from 16.2 times, which is well above the long-term average of 15.3 over the past 30 years, according to Thomson Reuters,” wrote Adam Shell in the report.

“The market is pricing in great expectations,” says David Kotok, chief investment officer at Cumberland Advisors. “There is little margin for disappointment.”

However, other analysts remain sanguine.

“When there is a quantum shift in growth expectations, the arithmetic of P-E multiples fails to capture the value in stocks,” argues Don Luskin, chief investment officer at TrendMacro.

Jim Paulsen says the stock market’s current valuation is “not excessive” and that “a P-E of about 17 is probably a sustainable multiple for the overall market”.

The US employment report on Friday showing an increase of 178,000 jobs in November had little impact on markets. While the headline number was positive, the report also showed fewer people looked for work and hourly wages fell.

Indeed, bond prices rose. The yield on the US 10-year Treasury note fell to 2.39 percent from 2.45 percent on Thursday.